A U.S. District Court judge on Friday refused Apple's request to temporarily suspend her own ruling that Apple violated antitrust laws. She also admonished Apple and ebook publishers for what she calls a "seriously continuing danger of collusion," according to the Associated Press.

Since then the U.S. Department of Justice proposed extreme solutions to address the price fixing issue: requiring Apple to terminate its current deals with the "big five" ebook publishers and make third-party ebook apps able to link to external stores, something against Apple's current app policy. An antitrust monitor would also be appointed.

Apple maintains its innocence, and has protested the Department of Justice's decision as "draconian," calling them "wildly out of proportion" to what Apple was found guilty of doing. The five publishers currently in business with Apple submitted court papers this week, claiming the proposal will "effectively punish" them instead of Apple instead - that raised Cote's ire, and she's taking it out on Apple.

Judge Cote said that any order she signs will be focused on evening the playing field between publishers and retailers, and said that it was clear the five major book publishers don't compete with each other on price.

Before Apple introduced the iPad, Amazon had a stranglehold on the ebook market - 90 perent marketshare. Amazon controlled the pricing too, wholesaling book sales from publishers. Apple's deal with the big five instead used a model called agency pricing, whereby the publisher, not Apple, set the price, and Apple took a portion of each sale.

From Apple's standpoint, they wanted to give publishers a reason to do business with them and customers a valid option besides Amazon's Kindle. This was good for the publishers and the authors, but it ended up costing consumers more - and that's the crux of this case. The Department of Justice's remedy is worse than the disease: as proposed, its plan would effective kill Apple's ability to sell iBooks for the next five years.

And with Apple cut off at the knees from competing in the ebook business, Amazon can resume its monopoly unabated. Do you really think Kindle ebooks are going to remain cheap forever? Amazon's like Walmart - they disrupt other retailers from competing by offering prices too low to match, growing marketshare at the cost of profit. Eventually, though, it becomes time to pay the piper, and you have no alternative but to pay more for the same thing because there's no other option.

It's the boiling frog analogy - changes over time go unnoticed if they happen slowly enough, and by the time you do notice, it's too late to do anything about it.

Why that hasn't raised the eyebrows of the Department of Justice is anyone's guess. Why, exactly, is the government turning a blind eye to blatantly predatory, anticompetitive behavior from Amazon?

One thing is for certain - it doesn't end here. Apple will appeal the ruling, and it'll be a long time before we see an end to this.

"And with Apple cut off at the knees from competing in the ebook business, Amazon can resume its monopoly unabated. Do you really think Kindle ebooks are going to remain cheap forever? Amazon's like Walmart - they disrupt other retailers from competing by offering prices too low to match, growing marketshare at the cost of profit. Eventually, though, it becomes time to pay the piper, and you have no alternative but to pay more for the same thing because there's no other option."

I'm no fan of WalMart, I hate their business practices, but when exactly did they begin raising prices? They've been putting mom and pop stores out of business for decades now, but their prices are as low as ever.

And how exactly does the settlement kill Apple's ability to sell ebooks for the next five years? I don't see anything about a sales ban?

They wont have any books to sell, because they can't have any book deals with the publishers.. ummm. duh? The publishers will pull out like mayflies of the east.. iBooks will not be much to look at once that happens..

They've basically decided to hand the book industry over to Amazon..

And oh, they are forcing Apple to set aside a part of their own business so other businesses (Amazon) can sell in Apples house / store w/o paying anything. yah.. wow..

They seem to think a digial store front doesn't have the same protections a physical store front.. If Amazon tried to force B&N to allow them free unpaid rental space in their brick and mortar store front, they'd have been laughed out of the country.

But because this is political, even punishment based it seems, it looks like they've decided to ignore some basic rights of store owners. Now Apple has to allow Amazon some digital store front propery in their platform for free.

I'm AMAZED more businesses are not deriding this.. It sets a precedent. Seems very socialist to me.

I'm also suprised more indipendent writers are not up in arms.. Apple basically created a self publishing market for writers who don't want to goto publishers with iBooks Author. Amazon copied it.. now only Amazon will have that market for the most part.

When the publishers are selling the books to Amazon at $13 and Amazon is selling the books at $9.99, they're taking a loss on the books. Most businesses can not (or will not) run their business on negative income. B&N, really the only other major Book seller, was already losing money on the Nook product.

By using their monopolistic power in online (and dare I say overall) book sales to dominate the ebook market, Amazon is essentially practicing predatory pricing, which is illegal. The big question then is why the DOJ didn't bring charges up on that.

Where higher prices helped the consumer was that it enabled other book sellers to get into a business where they could make a profit. Google even testified to this fact during the case. More sellers means more competition, which is better for the consumer.

You made to interesting statements that i'll discuss. "When the publishers are selling the books to Amazon at $13 and Amazon is selling the books at $9.99, they're taking a loss on the books." The second statement was as follows: "Amazon is essentially practicing predatory pricing, which is illegal. The big question then is why the DOJ didn't bring charges up on that."

The US Supreme Court set a two prong test for Predatory Pricing in a case called Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993). stating "Accordingly, two prerequisites to recovery are also the same. A plaintiff must prove (1) that the prices complained of are below an appropriate measure of its rival's costs and (2) that the competitor had a reasonable prospect of recouping its investment in below cost prices. Without recoupment, even if predatory pricing causes the target painful losses, it produces lower aggregate prices in the market, and consumer welfare is enhanced." In layman's terms the plaintiff must prove the defendant is selling below costs and that there is a likelihood they'll recoup all their costs later. On the point of recoupment the court goes on to state "The plaintiff must demonstrate that there is a likelihood that the scheme alleged would cause a rise in prices above a competitive level sufficient to compensate for the amounts expended on the predation, including the time value of the money invested in it."

Prong two is where your predatory pricing argument fails. Even taking the facts as you assert them they are selling at a loss yet there is no proof that there is a "likelihood" of rising prices and recouping their losses. It's not enough to simply argue that they'll later raise prices. And that rise in prices has to be enough, to cover all of the losses they took as this says, "including time and money invested." Thus any plaintiff would have to prove that there is a likelihood that Amazon will raise prices in an amount equal to every loss they've taken on a book. That's extremely difficult to prove in this case because they could simply keep selling book at a loss or no loss a small gain but on one to recoup their loss. Also, what's the value of their time and investment? That's gonna be tacked onto the calculation and they'd have to be proven likely to raises costs to a level equal to that additional amount. It's a very high burden to prove.

The court in Brooke Group Ltd. also states "This requires an understanding of the extent and duration of the alleged predation, the relative financial strength of the predator and its intended victim, and their respective incentives and will." In this case Amazon and Apple both have massive financial strength and it would be hard to argue Apple is at a financial disadvantage as one of the largest companies in the world with a huge cash position.

The court in Brooke Group Ltd. goes on to make it's most relevant point to your comment stating "Evidence of below cost pricing is NOT alone sufficient to permit an inference of probable recoupment and injury to competition. The determination requires an estimate of the alleged predation's cost and a close analysis of both the scheme alleged and the relevant market's structure and conditions. Although not easy to establish, these prerequisites are essential components of real market injury."

In your sentence above the only provable thing you've alleged is below cost pricing. But as stated that alone does not permit the court to infer satisfaction of prong two, recoupment of losses.

Finally, If Apple wanted to argue predatory pricing against Amazon the the proper avenue is to file a lawsuit not engage in their own anticompetitive practice in the form of collusion. It is simply not a defense to a claim of collusion to argue "defendant is engaging in predatory pricing."

For the record/"those who brought up predatory pricing", my argument had zero to do with predatory pricing. Bring it up is like:
DOJ: "Apple you got caught with your hand in the cookie jar."
Apple: "Look, a bird!

Now that is how a rebuttal is done ladies & gentleman! Kudos to you good sir for such a thorough & thoroughly explained reply.

I like & use Apple products daily. I have issues issues with a number of facets of Apple's business practices (that Tim Cook seems to be pivoting away from thankfully). But when you break the law as blatantly & openly as the case here was, you pay the price. This whole piece smacks of blatant 'see no evil, hear no evil, speak no evil' ignorance. Eddy Cue's testimony would get most any layperson locked up in most courts. Apple screwed up here. And that mainly was due to the ego of Steve Jobs & Eddy Cue just following along because as he himself said, "I needed to get this done for Steve. He was dying." Pretty stupid.

To keep trying to shift the focus to Amazon & accuse them or Wal-Mart or Dollar General or Kroger or _________ is just trying to do the old Harry Houdini & misdirect. Apple can afford to eat its crow here. They got caught. Guilty. Simple as that.

Thank you. There are lots of accusation, misinformation and misguided conjecture. I thought I would lend a more focused opinion pointing out relevant case law since it is the law that governs whether predatory pricing would actually apply. I love my Apple phone. I'm waiting for Haswells to buy an Apple computer. To me that's irrelevant to what is lawful or unlawful.

I order from Amazon when I need to, but I am not in love with their business model. I think Walmart with their 'brick and mortar' presence is less ethically concerning than Amazon as they fly below the tax and retail space radar. And there has been lots written about their net negative contribution to 'jobs'. Different thread.

On predatory pricing, long reply, but I do not think you are correct. I do agree with you that it is intentionally hard to 'prove', since the result of lower prices benefits consumers in the short term. Firstly for prices to be predatory, they must be below the seller's cost. This is undisputed.
Secondly prices need to facilitate, or have the effect of eliminating competitors. This has also happened. Thirdly, and to your main point, there needs to be an expectation of recouping losses. Currently Amazon runs without profit or with millions in losses - amazing given the billions of revenue. Kudos to Bezos who has this down to a fine art. However, it is the impression of others that Amazon prices have been rising. Amazon now has a practice of first discounting prices, then raising them as sales drop. In fact Amazon had over the last 2 years either lowered discounts on scholarly books or, in the case of older or slow-selling titles, completely eliminated them. Google it. Finally AMZN investors certainly expect 'huge profitability' in the future with expansion AND elimination of competitors. Listen to analysts explain why AMZN is where it is. Just look at their P/E ratio - elimination of competition is built in to their share price. Ironically with B&N exiting, Amazon might need Apple to stay in eBooks. If Apple simply dropped iBooks because they no longer can make a profit through an agency model, let's see what the DOJ does in the absence of ANY competition.

Even in the DOJ-Apple eBook trial, Cote made reference to Amazon pricing. Don't kid yourself - the DOJ knows it needs to watch this closely, mindful of public sentiment and political protection.

Lol apple is never the bad guys are they, they break the law and they the good guys. Its always someone else that are the big bad wolf offer here. And where are the signs that Amazon will raise prices or you just pulling things out of thin air. The fact is Amazon gave consumers cheaper price and once apple got involved prices went up.. they broke the law and should be punished its as simple as that.

But the DOJ has. Courts ruled against apple. Their was several smoking gun emails Jobs sent that got them busted. Apple was the middle man more or less telling the other publishers what each other was doing. I van promise you that the publishers lawyers were telling them this was a bad idea. The reason 5 of the 6 major publishers pretty much ed rolled over is they knew they were screwed.
The one publisher who did not get busted was the only one who did not go the agency route nor sign up with Apple.

Your the one who would fall under the blind category. Key part is Apple was the go between and the linchpin that made it all possible.

Thank you for explaining, I really couldn't be asked..how any one thinks apple hasn't broken the law is beyond belief when they have been found guilty due to solid evidence but like you said certain people just don't want to believe that apple can do any wrong even when the facts say they are.

I think rather than raising prices, once Amazon is in a monopoly position, they will dictate the price they pay for wholesale books. This is why the publishers/authors are scared of them. But is this good for the consumer? Sure, prices are lower, but publishers/authors will be paid less so some might not be able to make a living.

"Amazon's like Walmart - they disrupt other retailers from competing by offering prices too low to match, growing marketshare at the cost of profit. Eventually, though, it becomes time to pay the piper, and you have no alternative but to pay more for the same thing because there's no other option.

Why that hasn't raised the eyebrows of the Department of Justice is anyone's guess. Why, exactly, is the government turning a blind eye to blatantly predatory, anticompetitive behavior from Amazon?"

You misunderstand Antitrust law. What you describe is neither unlawful or anti-competitive. There is no part of the Sherman act that prohibits a retailer for selling a product at a loss merely because others can't compete. In fact mobile phone carriers take a loss on cell phones so they can earn it back selling you services. Airlines often slash fairs and take a loss in order to maintain keep other airlines from staying in a given market. For example, Delta's hub is Atlanta. They entered a price war to run Virgin airlines out of Atlanta. It is perfectly lawful to be an opponent on price. It's not lawful to when you are the one being beaten on price to fix prices with a group of like minded companies. It's not a matter of being anyone's guess. It's a matter of understanding the law.

Additionally, nothing in the order enjoins apple from selling ebooks. It should also be mentioned that prices going down is not the goal of antitrust law, it's to maintain fair competition. Competition may result in falling prices. But competition may result in prices going up or down.

So is this why eBooks are the same price on the Google Play store too? And what about paperbacks? They're the same price at Barnes and Noble, Waldenbooks, BDalton, and the rest of the major book stores.

Paperbacks are purchased on the wholesale method, the same way that Amazon wanted Kindle books to be purchased. That's why when the latest Dan Brown book comes out we can buy it for 50% off at Barns and Noble. Amazon didn't sell every book at a loss. That's a lie that the writer made up. He isn't telling the truth. They sold some books at a "loss" just like a local bookseller will. It's to get people into the store and hopefully they buy more.

As far as I'm concerned as any judgment on ebooks is fine what is not ok is the overreaching into Apples other business. This should be about and only about ebooks, not about the app store not about music, movies, or tv shows. The judge stated at the end of the trial as to be carful and not use broad strokes. As for Amazon they do have a hold on the ebook market and the government for some reason wants to keep it that way (they must get a discount), fine don't buy from Amazon. If I remember correctly Steve Job's didn't even want to have ebooks on the iPad but Eddie Cue talked him into it, its a small part of there whole business so go ahead take that away. With that said can anyone explain what would happen to the education part of the iBook store? To me if the government messes with that then they don't care about education because if I remember the text books are under a different price structure.

Not trying to say Apple can do no wrong, but I would love to see the evidence that Apple was the ring leader in this. From what has been made publicly available, the worst I see is that Apple, in order to have a chance, imposed a most favored nation clause (which, again, if the DOJ is really only trying to level the playing field and not only out to punish Apple, striking that portion of the contract is all it takes). The publishers, who, you know, set the prices, may have taken advantage of this for their own gain, using Apple's price guidelines as the starting point.

Again, I think the evidence made publicly available is circumstantial at best. If this was a trial with "reasonable doubt" this would be over.

Under the type of federal bench trial this was, the gov't prosecutor has to make a formal charge of perjury. Than a separate hearing is held outside of the main proceedings of any ongoing trial. But go ahead keep suggesting ideas. You may see Eddy Cue jailed for perjury yet.

Read the case. Evidence being circumstantial evidence is doesn't mean it's inadmissible or unreliable. Courts here circumstantial evidence all the time. Reasonable doubt is not the standard and how a case would have been decided under an inapplicable standard is irrelevant.

My sympathy for the publishers goes out the window really quickly when the paper book edition of a book I want is 40% less than the ebook copy. Btw this is not some best seller so it is not like amazon is going to discount it. It is a freakin star trek book. Little under 5 dollars paper and a little under 8 dollars Kindle.
There is a lot wrong with those numbers and it is a good part of the proof to me that the publishers did a lot to raise prices illegally. He'll I would be willing to bet they make a lot more money off the ebook copy than the paper and there is no way amazon is making a star trek book a loss leader.

Amazon didn't set prices. The publishers set the prices that they sold the books to Amazon and then Amazon set the prices that they sold to their customers. They didn't control the pricing anymore than your local bookstore does. Buy a clue.

The problem that happen with my book is amazon can set the paper edition price. Amazon can not set the ebook price. Mix that with the publishers more or less are forcing ebooks to be sold for msrp. It needs the change to the whole sell model. Publishers set the price amazon pays for them but amazon is allowed to set what ever price it wants.
The publishers worked with Apple to force the agency model down on everyone and raise ebook prices.
Hence the reason I have zero sympathy for the publishers whining. They thought when they settled that they could keep doing it because the key player to all of it (apple) was not going to be taken out. I support this move by DOJ taking Apple out of the playing field and forcing them back to the whole sell model.

It's just that when the book publishers settled with the DOJ in this case, the DOJ forced them to renew all their book selling contracts with Apple in order to meet their requirements. This wasn't very long ago. Now that Apple has lost its case, this Judge is now ordering them to terminate those contracts and make new ones under new requirements. It doesn't really make any sense, since the collusion that was argued about in the case happened years ago, not under the new contracts the companies have signed with Apple.

To level the playing field as the judge claimed everyone in engaging in the business of selling ebooks must have the opportunity of making a profit and not give the opportunity to one company which have the level age of pricing some of the books below cost.

And to use loss leaders as the norm of pricing for all ebooks is one mistake the judge overlooked in this case.

Kind of wonder how she will feel when her decision is judged erroneous.

Do you have a source for the eBook portion? Amazon is notorious for not sharing financial data on its ebook and Kindle division. I suspect they actually lose on eBooks but make their profit in this division on total of hardware sales, movies, music, and apps - which collectively allows some avoidance of the predatory pricing accusation.

"30. When Amazon launched its Kindle device, it offered newly released and bestselling e-books to consumers for $9.99. At that time, Publisher Defendants routinely wholesaled those e-books for about that same price, which typically was Jess than the wholesale price of the hardcover versions of the same titles, reflecting publisher cost savings associated with the electronic format. From the time of its launch, Amazon's e-book distribution business has been consistently profitable, even when substantially discounting some newly released and bestselling titles. "

Profitability equals being unethical? Wow - you sure don't own a company.

I think your broad and unsupported statement that Apple is unethical really shades all of your posts - you are starting from one view, that Apple is a terrible company and therefore deserves terrible things to happen to it. That about sum it up Rick? Personally I think Apple is no angel but better than most, especially under Tim Cook. There has been a huge surge in charity donations - Apple matches employee donations, they have been working with Chinese workers to improve conditions in the factories that they use - name another Western company doing the same. They continue to innovate and change how we use technology.

I am not sure what rainbow world you live in, but it is your comments (not Peter's) that are sad. Forget Apple if you really think they are that unethical - get some fresh air.

Ebooks have to remain cheap simply because if they don't people have many choices out there in small tablets to take their place. You can always buy a Apple mini, new Nexus 7 (13) or many other small tablets. So just due to the pricing of some high quality small tablets the Ebook has to remain affordable or they just won't sell. Just My Opinion. (Judge is a tough gal)

Its amazing how easy it is to change a persons opinion when their explained something from someone who understands it. Peter's love of Apple colors his view on this plus not being as knowledgeable on legal topic doesn't help. Once your informed from someone who can take the law and put it into an easier form then you can see that Apple did wrong plain and simple. If Samsung hired a person to talk to 5 of the top TV manufacturers and tell them to only sell their 42 inch TVs for a certain price and their 46 inch TVs for a certain price then that is illegal. You set your price and the other companies set theirs to compete with you. If you want to set it higher price than than your competition then you take the risk of less people buying it. However if you instead have someone workout a deal with your competition to set a price so everyone makes a lot of money then you no longer have to worry about competing with those companies. Instead you figure how high you can charge to make the most money and everyone sets that price. When you go to the store all the TVs cost a certain amount and your stuck paying that since there is no competition. That would allow a TV price to be set as high as the company thinks most would pay. If this was allowed TV prices would never have fallen as fast as it has in the last 10 years. We would still be paying double or triple what we pay now for our HD TVs and 4k TVs wouldn't be even in the conversation.

You have no understanding of the case or the vertical model that Apple worked in. Apple did not set the price, the publishers did. Apple received 30% from the agency model. And yes I too believe that prompted the publishers to raise prices, and it is possible that 'they' colluded.

Sorry to burst your anti-Apple bubble, but at most Apple provided a rental that was used as a getaway vehicle but did not orchestrate the bank job.

But what they did do is tell the publishers that they couldn't sell it ANYWHERE for less than what Apple had it selling for. Essentially enabling all the companies to collude to set a price instead of compete among themselves.

Again, you need to appreciate that Apple is in a vertical market role, a position that is essentially immune to the charges in this case to begin with, as it is the 'publishers' that set any price. Apple does not publish books.

Some thing is not right in Land of 'Oz' - and my thought is that it is centered on an unholy alliance between Amazon and the DOJ. Bezos knew he needed to target Apple somehow. Good to have friends in high places I guess. But good luck with your belief that Apple was the guilty one here..

"Do you really think Kindle ebooks are going to remain cheap forever?" - So Amazon is evil because the author believes that some time in the future they will raise prices, and Apple is good because it wanted to raise prices right now?

Apple approached publishers with a "solution" to their "problem". The "problem" was that *some* ebooks were too cheap, on the $9.99 range. The "solution" was to get in league with Apple, sign MFN clauses, withhold books from Amazon to force a renegotiation into the agency model, and finally raise overall prices of ebooks so Apple's bookstore could thrive and publishers could get higher margins. At the end customers would be paying more than ever on all stores, and publishers would be singing to the tune set by Apple.

Are we really expected to see Amazon as the villain and Apple as the good guy on this?